An empirical analysis of budgetary follow-up in the EU
Macroeconomic projections are an essential building block of any budgetary plan. This column studies the one-year-ahead budgetary projections from the Stability and Convergence Programmes of EU member states and finds that the most important variable explaining budget balance errors is GDP growth. More optimism in GDP growth projections produces more optimistic budgetary projections. The findings call for delegating the construction of output projections to adequately equipped national independent fiscal institutions.